Negotiation
Negotiation Negotiation is what takes place when two parties have conflicting interests but also share a common ground of mutual convenience, where differences can be solved. If we choose not to negotiate, then our only recourse will be the judiciary system through arbitration or litigation. In case it does not work or if we are conflict-oriented, then we will have recourse to coercion, to unilateral action, and we may end up in violence or war. Using force results in 2 options. You impose your decision or accept reality and admit defeat. Each individual has a particular way to negotiate, resulting from family-life experience and relations with neighbors and friends, since for all his/her life that individual has developed this particular way to manage conflict. Thus, each individual has an implicit negotiation theory. More broadly speaking, two different systems can be distinguished: the traditional one and the integrative one (the new theory of negotiations.) The first system is essentially a bargaining process, emphasizing the distribution of what is negotiated, under the assumption that one of the parties will win what the other party will lose. The new negotiation theory attempts to redefine the problem through an exchange of interests to expand the results for both parties. This system is now an international trend in different negotiation fields. The ground rules of negotiation: Getting to yes #'Separate the people from the problem': Understand the other viewpoint. Recognize that emotions are involved, allow them but do not react emotionally. #'Focus on interest rather than positions: '''your position is something you have decided, your interest is what made you decide. #'Generate a variety of options before settling on an agreement:' Separate the invention process from the evaluation stage. Refine and improve before settling. Make trade-off. #'Use objective criteria: Find criteria that both sides agree to be bound by, even for resolving disputes. Reconsider your position when they are objective reasons to. Never give in to pressure, threats, or brides. #'''You can always leave the negotiation: If the other party is not fair or use dirty tricks and pressure, you can focus back on the interests of the negotiation or cancel the negotiation altogether. #'Not everything is negotiable' BATNA Best Alternative To No Agreement. BATNA is different than a goal. It is usually a strong plan B. If you were to give up the negotiation, the BATNA is what you will be left with. It also gives you your limit. If without negotiating I can get this, then I don't need to negotiate. But if the offer is better than the BATNA, then the agreement should be considered. BATNA should never be disclosed to the other party as it transfers all the power to the opposite side. They know how low you are willing to go and will exploit this information. ZOPA The Zone Of Possible Agreement is used in distributive issues. It represents the space between the BATNA of the 2 parties. If you are willing to pay me up to 50k and I am willing to accept 25K, our ZOPA is between 25k and 50k. Any value between this 2 boundaries is acceptable. 3 different games in games theory: Luck (probability-based), Ability (skill-based), Strategy (other side actions based). Theories of negotiation What is the purpose of a negotiation theory? Just as in every field in knowledge, a theory is a human attempt to understand what occurs in reality, to describe, explain, predict and act upon that reality. In the case of negotiations, we must distinguish between those problems where value cannot be created (distributive reality) and those where this is possible. Distributing value: How to negotiate badly (HNB) First, pretend not to be interested in reaching an agreement. Second, be so demanding that the other party become discouraged. The first point can be played on the friendly side: let's get to know each other, build trust so he lower his guard and then you attack. It can be played offensively: be hard on negotiation, destabilize, intimidate the other party. Push him into a corner. It can be played sneakily: hide or modify information, reduce the numbers of real options, make the other believe there is only one option. Second point or HNB-4. Work using 4 gears: #Start with an ideal solution for you. Asking so much that nobody can agree on that. Anchor. #Go back to the lowest point possible (but highest for the other) just to explain how stupid this point sounds and but it outside the ZOPA. #Mentioned a reasonable middle ground (your real objective) but toned it down so it seems like a bad option for you. #Negotiate on a proposal that is great for you but difficult to achieve. When negotiation becomes tense, you "agree" to settle for 3. Issues arise when both use the same method as the 2 extremes are so far apart than no agreement seems possible. It creates a frustrating environment that will be detrimental to the long term relation. Finally, by limiting the scope of negotiation, you may miss opportunities and possibilities that could have been better for both parties. New negotiation theory The new negotiation theory has pointed out the huge waste of opportunities embodied by this distributive conception, as well as the failures of the negotiation procedure it implies. The new theory's chief contribution to solving a distributive problem is using objective criteria and standards instead of having the parties to entrench themselves in the highest possible position. Another contribution from the new negotiation theory to solving distributive problems is the search for the interests behind the parties' positions. Among the most limiting factors in negotiations is process superficiality and the fact that parties do not work in-depth in the pursuit of their interests. Superficiality begins by believing the problem and its solution are known beforehand, without engaging in exploring common interests and restating the problem; in other words, a focus on negotiating what is superficially at stake. The initial position or proposal is often a solution, but not the only one, and real interests are in the background. The essence of the problem is usually underlying and long-term considerations or differences between the parties provide opportunities to create value. Summary of both theories New negotiation Step-by-step Step 1: Get information to create value We tend to overestimate our understanding of the other side's interests and of ours. Preparing the negotiation is therefore key. Take the time to truly understand where your interests lie. Sharing information is key to move the negotiation forward. It can be done in a give and take fashion where parties share information one after the other. Asking for priorities is a good way to help clear the interest of each other. Negotiating several issues at once and making multiple offers at the same time can also help you understand the trade-off the opposing party is willing to make. #'Ask why instead of what. '''Do not only focus on what the other party wants but try to understand why they want it. #'Mitigate other constraints. Constraints can come from external services or advice. You may find a way to reduce the other party's risk or concern using your own resources. #'Interpret demands as opportunities. '''Demands are usually used to offset a potential risk. If you understand the mitigation, you may use the opposite to reward a potential benefit. #'Create common ground with adversaries. Competitors may be good allies in certain negotiations. #'Keep going even if the deal is lost.' Understanding why you lost maybe a good way to perceive room for improvement. Step 2: Create value during the negotiation There are the best ways to create value during the negotiation. For now, the objective is to put as much money as possible on the table. you need a climate of trust and share of information, you can create it by asking and answering questions honestly. It will also help you understand the other person's interests and how they combined with yours. Focus on them rather than on position. This can be initiated before the negotiation or started during the first meeting. Step 3: Generating deals Even in this phase, we want to avoid haggling as much as possible. we want to find ways to create value. One party should make several offers simultaneously. Not only it gives choices to the other side, but it can also give you information regarding the trade-off they are willing to make, and therefore, their interests. Step 4: Post settlements After the settlements, thinks about contingency plans if relevant. Keep taking care of the relation and commit to your promises. Negotiation in practice Is it better to address first a difficult or an easy issue? Traditionally, dealing with an easy issue has been seen as more convenient, as this facilitates reaching an agreement and creates a favorable atmosphere for further negotiation. However, this procedure entails some difficulties. The first issues negotiated take more time than the last ones. Thus, time is spent in dealing with easy issues and not much room is left to deal with the most complex issues. Some authors have concluded that it is better to negotiate the most difficult issues first. Once those are resolved, the rest will be solved as a result. One additional issue that complicates the choice of the negotiation order of issues is that the difficult issues for one negotiator may be the easy ones for another. This facilitates negotiations as this allows trading off concessions in the issue package. Also, it creates value in the process of negotiating. In fact, when negotiations start with the most difficult issues, negotiators are open to making concessions in other points, which is equivalent to negotiating the entire package at once. Dealing with an old theory negotiator What if you believe in the new theory but the other party believes in the first one? How to negotiate with him? In order to negotiate with an aggressive person, it is not advantageous to be conciliatory, for it attracts more aggressiveness (experiences of Peña Nieto from Mexico, or Chamberlain before Hitler). Anyone who understands negotiation as defeating the other side does not seek mutual interests. Even less if he is a self-centered individual with authoritarian personality traits. To answer him with the same arrogance is not a good idea, because the confrontation is likely to lead to mutual losses, especially if one has less power. My advice is to negotiate firmly, to insist on our own objectives, to base ourselves on concrete facts, and especially to be well-prepared to propose solutions of mutual benefit. One must seek other options beforehand and by doing so, improve the external alternative (BATNA): what we would do in case there is no agreement. The first step in bringing the other party around to more effective negotiating behavior is controlling one's own behavior. When facing a difficult opponent, Ury recommends "going to the balcony." Do not react. Instead, keep your mental equilibrium by distancing yourself emotionally and viewing the situation objectively. Identify your underlying interests and your best alternative to a negotiated settlement (BATNA). Take a moment to recognize the tactics your opponent is using, and to recognize your own feelings and "hot button" issues. When in negotiations, pause, take a time-out, or review the discussion to date in order to gain time to review the settlement objectively. The next step is to disarm the opponent by stepping to their side. The goal is to reassure the opposite side and help them regain their own mental balance. Listen actively to them, acknowledge their points and feelings. Express sympathy for their problems. Focus on areas of agreement. In expressing your own views adopt a both/and approach. Say "Yes, and..." instead of "But...". Step three is to reframe the dispute in terms of interests rather than positions. The best way to get the opposite side to focus on interests is to ask open-ended, problem solving-oriented questions. Ask "why" questions to elicit the opponent's interests. If they resist, ask them "why not" questions about alternative solutions. "What if" questions introduce new options without directly challenging the opponent's position. Position-based negotiating tactics can be handled by ignoring them, or by reformulating them. Step four is to "build them a golden bridge" to draw them from their position to an agreement. Make it easy for them to say yes by removing common obstacles to an agreement. Offer them choices. Try to understand the other side's logic and perspective, and do not overlook intangible interests such as needs for recognition, identity or security. Many people will reject an agreement rather than lose face. One way is to seek third-party recommendations. Ury notes that "a proposal that is unacceptable coming from you may be acceptable if it comes from a third-party." Finally, people may resist an agreement if it is too much change, coming too fast. Break the agreement into a progression of smaller agreements. If they resist, reassure them that no commitment is final until all are. Do not rush the final agreement. Step five offering ways to make it hard for the opponent to say no. The goal is to educate the other party to realize that an agreement is in their best interest. Ask them reality-testing questions about what will happen if no agreement is reached. Alert them (without threatening) to your BATNA. If they still resist agreement, you may need to deploy your BATNA. Because imposed settlements are unstable, it may be better to negotiate an agreement even in cases where you have a decisive advantage. The goal is to win them over so that they become partners in a shared problem-solving process. The anchor The results of Maaravi, Ganzach, and Pazy’sstudy suggest four prescriptions for negotiators, depending on whether you are making the first offer or responding to one: #'Pause before persuading.' When counterarguments are easily available to your counterpart, your persuasion efforts can backfire in a negotiation. On the other hand, negotiators may be more receptive to novel information you might provide, such as a newly lowered price or confidential data. #'Consider the opposite.' When the other side makes an initial offer, it can be quite difficult to see past it. Seek out information that is inconsistent with the other party’s first offer—and present it as a counterargument. #'Be ambitious and reasonable.' Though it generally pays to aim high, extreme offers likely will drive the other side to search for counterarguments. #'Don’t avoid the challenge.' Making the initial offer poses clear risks. Yet research suggests that in many contexts, those who drop the first anchor do better than those who must try to overcome it. Package negotiation The concept of packages is that you grant the other party something that is very important to that party but not very costly to you. In turn, you get something very important to you but not very costly to the other party. Many believe this is a rare, lucky chance, but in practice, it is the most common reality. To negotiate a package you follow the principle that nothing is agreed until everything is agreed. Different negotiation points are explored, finding out each party’s interests, to reach a mutual understanding of their priorities. Parties must trust each other and must show a genuine desire to create mutual value. Objective criteria As mentioned before, the new theory of negotiation relies on objective criteria as a base for negotiation. In a negotiation involving opposite interests, differences of perception, positions, power, etc, may create battles of wills and destroy relationships. Before entering a negotiation, parties should agree on a range of objective criteria to use. Criteria should be legitimate and practical. They are a lot of options possible, feasibility, scientific finding, standards, 50-50, Cost +X, BATNA +X, etc. One of the ways to test the objectivity is to ask both parties if they would like to be bound by these standards during negotiation. Once the criteria have been determined, the issue should be solved using these criteria. Each party should be willing to reconsider their positions when there is a reason to. Objective criteria are also a good way to avoid the use of threats, pressure, and brides. If the other party is more powerful or dishonest, objective criteria can be a good opportunity to refocus the negotiation on the interest rather than the individual or the position. 10 point rules for negotiation #'Keep a respectful, gentle relationship at a colleague level'. Do not think of the other side as your enemy; neither as your friend (or potential friend). #'Your main purpose is solving a common problem'; it is neither beating the other party nor reaching an agreement at any rate. #'Think of the long-term results of this negotiation,' both for your relationship with the other party and for future negotiations. #Look for the kind of favorable solution that could be given by a judge or an external arbitrator: turn to numbers and to reasoning. Leave out lies and threats. #'Think of the other party as much as you think of yourself. '''Do not make any proposal that is not fair enough. Instead, make proposals that are good to you and at least acceptable to the other party. Explore all the possible options before making a proposal, and make multiple offers simultaneously. #'Redefine the problem at hand as broadly as possible to include the other party’s most extensive interests''' as well as your own interests. Use negotiation as a means to redefine the problem at hand by asking questions and by opening your mind to new ways to visualize a solution. #'Do some calculation work prior to sitting at the negotiation table.' What is your external alternative (what you would do in case no agreement is reached)? What are your priorities, what is the relative value of each negotiation point #'Ask questions and gradually exchange information.' Determine, as accurately as you can, what elements are totally incompatible with those of the other party; which coincide in the same interest, and which are valued differently by each party. #'If you have to bargain distribution of benefits, propose and use objective criteria,' external to negotiators subjectivity, as the standard for the distribution. #'Expand the “package”; try to enrich the result of the negotiation to all parties involved.' Simultaneously, look for and identify the total “package” of issues to be negotiated. Determine differences in value between you and your counterpart and try to exchange those points of the highest value to you for those with the highest value for your counterpart. This way value will be created and both parties will receive a larger benefit. The mindset of a negotiator Negotiation power A person’s negotiating power depends on his/her actions and abilities, not only on resources. Negotiation workshops clearly show that even from power positions that are structurally very secondary, people can begin to lead the process and obtain excellent results. Five elements are key to help obtain greater negotiating power: going well-prepared, taking proposals and knowing how to make counteroffers, doing prior informal negotiations, managing alliances and coalitions well, and finally, resorting to principles of justice. Preparing for a negotiation essentially means three things: a) having a clear best alternative to the negotiated agreement or an exit strategy (what we would do in case we do not come to an agreement with the other party), b) knowing what our main interests are and which ones are secondary, and c) seeing what possible different outcomes exist for the problem. Calculating the best alternative to the negotiated agreement helps us identify the maximum or minimum boundaries that we can accept in the negotiation and gives us the possibility of improving our best alternative before we sit down to negotiate (which will increase our negotiating power). Taking a (reasonable) proposal to the table impacts and influences the final decision. If the person is well-prepared, s/he can react and quickly make counteroffers that integrate the others’ needs into a common solution. Before a meeting in which you will make important decisions, talk to all of the people involved. Inform them of your interests, ask them about theirs and explore possible solutions that would acceptable to both. How do you get more negotiation power *'Be prepared': have numbers, look for options for this negotiation but also to increase your BATNA, find your deep interests. Do all of this for your competition. *'Make proposals: '''use sustainable and objectives proposal, be fair. Insist on interest rather than position. Make simultaneous offers and explore mutual interest. Be quick, make counter-proposals. *'Informal negotiations: Dels made outside the formal set up. Look for conversations, be proactive. Explore every party, have a conversation with all of them. Learn about their BATNA, criteria, preference, options, etc. *'''Be persuasive: Build credibility, look like them to be accepted. It is not only eloquence nor charisma or manipulation. Use Ethos, Logos, Pathos *'Make Coalition: '''Make coalitions with parties with common interests, interests can be different as long as they are not opposing. Stay aware of your power in this coalition. Try to divide other coalitions. Cooperate, then retaliate, but be able to forgive (tit for tat & prisoner dilemma). All alliances are temporary. nothing personal. *'Appealing to principles: Humanity, liberty, equality, cry, pitty etc. *'''Investigate the other's interests: informal negotiations are a great tool. It is about being able to make a proposal. Do not be afraid to make coalitions or to appeal to feelings (be ready to cry). Bids and auctions With the internet, the trend is moving toward a kind of negotiation more and more focused on price. These negotiations are made as auctions or bids. You can use English auction (from low to high) or Durch Auctions (High to low), the last one being more popular with perishable goods. There are several other variants you can use. You can make close bids by using secret bidding, you can state that the winner gets the second payment (to ensure some distribution of profit), you can sell the whole package, by lots or fragmented and even combine them with negotiations. Getting to know your customer interests is usually key to determine how you should perform the auction to get the most value possible. Coalitions are a double edge sword, they can increase the money on the table but can also shift the power distribution. You may want to be careful. Conflict Mediation See Mediation page for more information If the negotiation lasts for too long, frustration may arise. Mediation is the act of bringing a third, neutral, party to a negotiation or a conflict in the hope of settling it. They are 3 different types of conflict resolution: Mediation, Arbitration, and Litigation. Each of these methods requires the use of a mediator. Ideally, they are patient, creative and have the ability to develop a relationship of understanding, empathy, and trust. Negotiation and culture See Culture Negotiation for more information. If you have to negotiate cross-culturaly, do not try to be like them: rest assured that with all the practice they have had since they were small, you will never be able to match them. Nor should you act on your own to try to get them to adopt your customs and way of being: there will probably be a great deal of misunderstanding and it will be difficult for you to teach them your ways in such a short period of time. As you learn about other cultures, enjoy the differences and avoid misunderstandings. As a Latin American ambassador, I met in Tokyo said: in these modern times, it is not enough to be bilingual, you also have to be bicultural. Category:Elective Category:Theory Category:Soft skills Category:Negotiation Category:Master